Mass Customization is the new paradigm that replaces mass production, which is no longer suitable for today’s turbulent markets, growing product variety, and opportunities for e-commerce. Mass customization proactively manages product variety in the environment of rapidly evolving markets and products, many niche markets, and individually customized products sold through stores or over the internet e-commerce system.
Mass customizes can customize products quickly for individual customers or for niche markets at better than mass production efficiency and speed. Using the same principles, mass customizes can build to order both customized products and standard products without forecasts, inventory, or purchasing delays.
Mass customization is the new paradigm in manufacturing whereby companies personalize or customize products or services for individuals at a mass production price. (Davis, 1987) (Cited in Pines, 1993). It is a flexible process and structure of the organization to mass produce variety of products designed specifically to meet customers’ requirements.
Today, advance technology in production enables a firm to produce products customized based on the demand of the customers in bulk. The advance of technology changed customer standards of living by the increase demand of personalized products that that suits their own preference, taste and style. Hence, customers can only be satisfied when the products are customized to meet their requirements. The living standards of the customers will only improve when their requirements are met. (Zhan, 2009)
In recent years, enterprises gained tremendous competition advantages by implementing large-scale customization. Some experts predicted that large-scale customization would gradually replace traditional mass production and become the manufacturing mainstream mode. (Zhan, 2009) Thus, making companies not only having a cost reduction avenue and achieve economic of scale. With that, companies can also increase wages of their staffs which will eventually increase the standard of living of the staffs and put a lid on inflation.
Interactive technologies such as internet, allows customers to interact with the producers and specify the unique requirements which are then manufactured by the automated system. (Bapna et all, 2000) Companies such as Dell utilize e-commerce system from which their website enables customers to customize their own laptops to their preferences then order and make payment online. The system will then list down the specific requirements of the customer and assemble the laptop, then deliver to the respective customer (Kepczyk, 2008)
E-commerce system will benefit both the customer and Dell as the manufacturer. Customers will advantage from buying a products that meets their requirement efficiently, while Dell achieve not only economic of scale through mass customization, but also operational cost reduction in distribution system. Therefore, e-commerce plays a big role in distributing customized products to the end customers directly.
Moreover, mass customization can also become a competitive edge in manufacturing technique. Mass customization allows producers to reduce waste and cost of production that does not meet the customers demand. One would argue that market forecasting can reduce the risk. But as the society demand and preferences changes, mass customization is the solution to produce in large volume at the same time meeting the customers demand. (Blecker and Friedrich, 2006) This manufacturing technique is proven the most efficient approach for manufacturers such as Toyota and Dell.
Mass customization is the new paradigm in manufacturing whereby companies personalize or customize products or services for individuals at a mass production price. (Davis, 1987) (Cited in Pines, 1993). It is a flexible process and structure of the organization to mass produce variety of products designed specifically to meet customers’ requirements.
Today, advance technology in production enables a firm to produce products customized based on the demand of the customers in bulk. The advance of technology changed customer standards of living by the increase demand of personalized products that that suits their own preference, taste and style. Hence, customers can only be satisfied when the products are customized to meet their requirements. The living standards of the customers will only improve when their requirements are met. (Zhan, 2009)
In recent years, enterprises gained tremendous competition advantages by implementing large-scale customization. Some experts predicted that large-scale customization would gradually replace traditional mass production and become the manufacturing mainstream mode. (Zhan, 2009) Thus, making companies not only having a cost reduction avenue and achieve economic of scale. With that, companies can also increase wages of their staffs which will eventually increase the standard of living of the staffs and put a lid on inflation.
Interactive technologies such as internet, allows customers to interact with the producers and specify the unique requirements which are then manufactured by the automated system. (Bapna et all, 2000) Companies such as Dell utilize e-commerce system from which their website enables customers to customize their own laptops to their preferences then order and make payment online. The system will then list down the specific requirements of the customer and assemble the laptop, then deliver to the respective customer (Kepczyk, 2008)
E-commerce system will benefit both the customer and Dell as the manufacturer. Customers will advantage from buying a products that meets their requirement efficiently, while Dell achieve not only economic of scale through mass customization, but also operational cost reduction in distribution system. Therefore, e-commerce plays a big role in distributing customized products to the end customers directly.
Moreover, mass customization can also become a competitive edge in manufacturing technique. Mass customization allows producers to reduce waste and cost of production that does not meet the customers demand. One would argue that market forecasting can reduce the risk. But as the society demand and preferences changes, mass customization is the solution to produce in large volume at the same time meeting the customers demand. (Blecker and Friedrich, 2006) This manufacturing technique is proven the most efficient approach for manufacturers such as Toyota and Dell.
In aircraft manufacturing industry, mass customization is also practiced. Aircraft manufacturers such as Airbus and Boeing manifest different types of variety and customization in producing their finish goods. Hence, these manufacturers encounter challenges in producing customized products.
Gilmore and Pine (1997) identify four product perspective customization strategies; collaborative, cosmetic, adaptive and transparent. (Appendix 2) Hence, aircraft manufacturing falls under the collaborative customization category. In collaborative customization, the firm conducts a dialogue with individual customers to help them articulate their needs, to identify the precise offering that fulfills those needs, and to make customized products for them. (Gilmore and Pine, 1997) A customer defines the needs, wants, requirements and specification of the aircraft, only then the manufacturer assembles the products.
For instant, when Malaysia Airlines orders a new Airbus A380, the Airbus Company will ask the specifications, advance features, additional needs and preferences as well as the painting of the aircraft exterior. Thus, making the production of the aircraft is collaborative between the customer’s specific request and the company.
Some challenges of the product perspective are the miscommunication and misdirection from the respective customer, making the producer to mistakenly customize the product. Hence, a challenge for the manufacturer is to match the product customized exactly with the specification required.
While the product perspective oversees the manifestations of variety and customized product, the process perspective looks at where in the production value chain the company implements the customization (Comstock et al, 2004).
Generally, the process perspective is either to make to stock or (push system) or make to order (pull system). Make to stock (MTS) is when manufacture products for stock based on demand forecasts, which can be regarded as push-type production. MTS has been required to prevent opportunity loss due to stock out. While Make to order (MTO) is when manufactures starts production once the customer places the order (Anderson, 2004).
Aircraft industry as mentioned above only manufactures the aircrafts once an order of a specific aircraft is accepted from the customers. Thus, making the aircraft manufacturers practice MTO or make to order.
A big challenge in make to order or pull manufacturing system is the time gap between the order and the actual delivery of the finished good. It is a huge challenge for aircraft manufacturers to meet the promised time of delivery to the airline industry.
Lastly, mass customization must also follow the system perspective whereby it select enablers that makes customized product variety and customization possible are the focus. Zipkin (2001) outlined three main elements of mass customization that are connected by powerful communication links. They are; customer elicitation, process flexibility and logistics.
These communication links are the system perspective that aids makes mass customization possible. Some to mention are systems such as computer aided design (CAD), supply chain management system (SCM) and even customer relationship management system (CRM). These systems, including the e-commerce system acts as intermediary that links the customers to producers are those that enable mass customization to work at a specific point.
Yet, system perspective also having the challenge of system failures that might occur to the automated system they used in providing the customized product. Thus, making companies to always enhance and upgrade their system in order to avoid system failures.
Anderson (2004) argued that there are three ways to customize products: modular, adjustable, and dimensional customization. Modular customization usually modules are literally building blocks that can customize a product by assembling various combinations of modules. Examples of modules would include many components in automobiles such as engines, transmissions, audio equipment and tire.
Adjustable customization on the other hand is a reversible way to customize products. Adjustments could be infinitely variable. Discrete adjustments, or configurations, would represent few choices, such as those provided by electronic switches, jumpers, cables, or discrete software.
While dimensional customization, involves a permanent cutting-to-fit, mixing, or tailoring. Dimensional customization could be infinite or have a selection of discrete choices. Examples of infinite dimensional customization would include the tailoring of clothing and grinding eyeglasses.
Overseeing that there are many methods of product customization, this shows that mass customization has the potential to create or develop new products to be offered to the market. Hence, through mass customization, more varieties and featured product evolves and are created by manufacturers.
A good example is the giant A380 Airbus aircraft that was designed after customization of aircrafts to accommodate more passengers. Airbus A380 is right now the largest passenger plane ever made in the world to accommodate long haul flights that enables airlines to save on petroleum cost. The invention of the new airbus is a process of customization both modular and adjustable.Therefore, it can be concluded that mass customization has drive new product development and product creation to exist and enhance the creation of new products that will accommodate the changing needs and preferences of the customers.
In conclusion, mass customization has become a new paradigm in the manufacturing industry which will shift mass production as it is proven more efficient and effective in both reducing cost and ensuring profitability of certain product.
Hence, with the aid of e-commerce and advance technology, a complex and specified customization can easily be done by producers by enhancing the information flow in the supply chain management. Through disintermediation, producers not only saves cost of product distribution, but also able to meet the exact demand and interact with their respective customers.
Furthermore, mass customization not only beneficial to the producers extends, but also to the customers as they achieve a higher degree of satisfaction through the products that are customized to meet their personal requirements. Thus, it will also drive the creation of new products as the demand of customers’ changes.
Showing posts with label Business Communication. Show all posts
Showing posts with label Business Communication. Show all posts
18 Oct 2010
Analyzing the Malaysian Business Environment
Prior to setting up a business or expanding a business to a new environment, it is essential that businesses take note of the environment factors effecting the business operations. Living and studying in Malaysia made me to analyze the environment factors as below.
Political-Legal Environment
Political stability is an important consideration in making investment decisions. Jürgen (2000) in Smith (2005) outlined factors leading to political instability, namely corruption, collusion and nepotism, non-democratic systems of government, inadequate electoral systems, lack of separation of powers and dependency of the judiciary.
Moreover, political risk can be measured in terms of internal strive to conflict between neighboring countries, and other unforeseen dangers such as conflicts, war and terrorism. Thus all generates compiling effects to the businesses invested in the country.
Malaysia as a federal constitution monarchy state which also adopts parliamentary democracy can be considered to have a very stable government. Malaysian government known as National Front consists of UMNO (United Malays National Organization) and parties from other communities such as MCA (Malaysian Chinese Association) and MIC (Malaysian Indian Congress) can work towards common benefits peacefully resulting in democratic elections in the country (Trade Chakra, 2009).
However, internal conflicts due to ethno-religious differences often occur in a complex society like Malaysia, resulting to political unrest in the country. For instant, controversy over use of the word ‘Allah’ resulting in tensions between different beliefs in the society and even the parliament (Mydans, 2010). Hence, a number of high – profile corruption cases involving bribes has made doing business in Malaysia inconvenience (BACP, 2010).
In addition, Malaysian government has numerous legislations in favor of the indigenous people and the Malaysian citizens in form of trade law and investment policies intended to protect the local economy. (Trade Charaka, 2009) Despite having these tensions, Malaysia is still considered politically stabile remained intact for foreign investors to expand their businesses.
Economic Environment
A stable political environment, effective bureaucracy, flexible economic policies, export-oriented industrialization and inflow of foreign direct investments (FDIs) has benefit Malaysia’s economy over the past decade. (Davies, 2009) This brought prosperity and a high level of confidence to the majority of the population in form of their purchasing power.
Malaysia has a healthy rapidly growing economy with a low inflation rate and currency exchange tightly regulated and pegged to the US dollar (Mohamed, 2001). Regardless the government has been criticized for state intervention over economic development and the imposition of capital and currency exchange controls in 1998, (Mohamed, 2001) the government is now reconsidering to liberalize the economy.
In 2008, Malaysia also suffers from the global economic crisis. Gross Domestic Product (GDP) growth significantly drops to 0.1%, compared with an average of 6.3% in the first 9 months of the year (Abdul Razak, 2009).The decline mainly due to contraction in export value of 13.4%. The fall in exports has adversely affected economic growth of the country (Abdul Razak, 2009). Hence, the government promises higher economic development, through stimulus packages offered to aid the local economy in 2010.
Despite the global economical crisis and the increase of taxes and tariffs, Malaysia still remains among top 10 competitive economies in the region benefiting from strong demand in Asia and efficient economical policies the businesses in to invest (Mohamed, 2010). Thus investors are encouraged to devote in businesses to the Malaysian market.
Social Environment
Malaysia is indeed complex having a high level of heterogeneity of cultures, races, religions and beliefs domestically. Islam being the majority constitutes many teachings that affect the socio-cultural perspective of the people (Davies, 2009). For instants, norms and ethical issues in the society are aligned to the Islamic law such as having Halal certifications for all public consumed products in the society. Thus businesses are obliged to follow these norms as well as being socially responsible to the community.
Moreover, with the constantly changing demographics, Malaysia’s socio-cultural factors implies on the trends and buying behaviour of the people, thus purchasing power are also affected due to the nations’ unstable income rate (Davies, 2009). Trends such as technology procurement, healthier lifestyle and more women in the workforce derive Malaysia’s economy to grow rapidly. Therefore, being socially cautious and responsible with aid of the media is the best approach in entering the Malaysian business market.
Technological Environment
Malaysia has the every opportunity to advance the technological development of the country. Technologies for production, transportation and communication have been established as the nation infrastructure after the rise of Petronas and Malaysia’s economy in 2001. (Lai and Yap, 2004) Thus innovations and advancement of technologies are encouraged over research and development as well as through higher education all over the country.
Innovations on green technologies have shown the excellence and the capabilities of Malaysia in producing better methods to answer the global climate change (Matrade, 2010). While advancement in nuclear technology secures Malaysia from shortage of electricity in the long run (Associated Press, 2010) Hence, the nations’ quality of internet connection services has been upgraded to cater the growing population demand for internet (Bernama, 2010)
Although advancement of technologies in Malaysia has rapidly been endorse by the government to cater to the needs of the people as well as the businesses, intellectual property rights and patents would need strengthening to avoid misuse of technologies available. Yet, businesses to operate in Malaysia shall have nothing to worry about the technological development of the country both as infrastructure and procurement.
Political-Legal Environment
Political stability is an important consideration in making investment decisions. Jürgen (2000) in Smith (2005) outlined factors leading to political instability, namely corruption, collusion and nepotism, non-democratic systems of government, inadequate electoral systems, lack of separation of powers and dependency of the judiciary.
Moreover, political risk can be measured in terms of internal strive to conflict between neighboring countries, and other unforeseen dangers such as conflicts, war and terrorism. Thus all generates compiling effects to the businesses invested in the country.
Malaysia as a federal constitution monarchy state which also adopts parliamentary democracy can be considered to have a very stable government. Malaysian government known as National Front consists of UMNO (United Malays National Organization) and parties from other communities such as MCA (Malaysian Chinese Association) and MIC (Malaysian Indian Congress) can work towards common benefits peacefully resulting in democratic elections in the country (Trade Chakra, 2009).
However, internal conflicts due to ethno-religious differences often occur in a complex society like Malaysia, resulting to political unrest in the country. For instant, controversy over use of the word ‘Allah’ resulting in tensions between different beliefs in the society and even the parliament (Mydans, 2010). Hence, a number of high – profile corruption cases involving bribes has made doing business in Malaysia inconvenience (BACP, 2010).
In addition, Malaysian government has numerous legislations in favor of the indigenous people and the Malaysian citizens in form of trade law and investment policies intended to protect the local economy. (Trade Charaka, 2009) Despite having these tensions, Malaysia is still considered politically stabile remained intact for foreign investors to expand their businesses.
Economic Environment
A stable political environment, effective bureaucracy, flexible economic policies, export-oriented industrialization and inflow of foreign direct investments (FDIs) has benefit Malaysia’s economy over the past decade. (Davies, 2009) This brought prosperity and a high level of confidence to the majority of the population in form of their purchasing power.
Malaysia has a healthy rapidly growing economy with a low inflation rate and currency exchange tightly regulated and pegged to the US dollar (Mohamed, 2001). Regardless the government has been criticized for state intervention over economic development and the imposition of capital and currency exchange controls in 1998, (Mohamed, 2001) the government is now reconsidering to liberalize the economy.
In 2008, Malaysia also suffers from the global economic crisis. Gross Domestic Product (GDP) growth significantly drops to 0.1%, compared with an average of 6.3% in the first 9 months of the year (Abdul Razak, 2009).The decline mainly due to contraction in export value of 13.4%. The fall in exports has adversely affected economic growth of the country (Abdul Razak, 2009). Hence, the government promises higher economic development, through stimulus packages offered to aid the local economy in 2010.
Despite the global economical crisis and the increase of taxes and tariffs, Malaysia still remains among top 10 competitive economies in the region benefiting from strong demand in Asia and efficient economical policies the businesses in to invest (Mohamed, 2010). Thus investors are encouraged to devote in businesses to the Malaysian market.
Social Environment
Malaysia is indeed complex having a high level of heterogeneity of cultures, races, religions and beliefs domestically. Islam being the majority constitutes many teachings that affect the socio-cultural perspective of the people (Davies, 2009). For instants, norms and ethical issues in the society are aligned to the Islamic law such as having Halal certifications for all public consumed products in the society. Thus businesses are obliged to follow these norms as well as being socially responsible to the community.
Moreover, with the constantly changing demographics, Malaysia’s socio-cultural factors implies on the trends and buying behaviour of the people, thus purchasing power are also affected due to the nations’ unstable income rate (Davies, 2009). Trends such as technology procurement, healthier lifestyle and more women in the workforce derive Malaysia’s economy to grow rapidly. Therefore, being socially cautious and responsible with aid of the media is the best approach in entering the Malaysian business market.
Technological Environment
Malaysia has the every opportunity to advance the technological development of the country. Technologies for production, transportation and communication have been established as the nation infrastructure after the rise of Petronas and Malaysia’s economy in 2001. (Lai and Yap, 2004) Thus innovations and advancement of technologies are encouraged over research and development as well as through higher education all over the country.
Innovations on green technologies have shown the excellence and the capabilities of Malaysia in producing better methods to answer the global climate change (Matrade, 2010). While advancement in nuclear technology secures Malaysia from shortage of electricity in the long run (Associated Press, 2010) Hence, the nations’ quality of internet connection services has been upgraded to cater the growing population demand for internet (Bernama, 2010)
Although advancement of technologies in Malaysia has rapidly been endorse by the government to cater to the needs of the people as well as the businesses, intellectual property rights and patents would need strengthening to avoid misuse of technologies available. Yet, businesses to operate in Malaysia shall have nothing to worry about the technological development of the country both as infrastructure and procurement.
31 Oct 2009
Making The Perfect Pitch
Although many business owners operate retail shops that focus on providing products for customers, some owners face the task of selling their services to prospective clients. While these services are needed, customers often shop around due to the fact they are not purchasing a tangible product they can see before they buy. This is why it is important that business owners are able to deliver the perfect pitch and close the sale.
Determine why your service is needed
Understanding the reasons behind the purchase is one of the key ways to ensure you make the perfect pitch as a business owner. For some business owners this will be obvious as clients purchase or inquire about their services due to something that has happened in their life or something they need. Lawyers are a great example of this as people seek them out when they are in trouble with the law or are forced to go to court. However, other business owners may not have it this easy with their potential customers. For example, advertising companies must often ask a lot of questions before they get to the truth behind why the business they are working with needs their help.
Know your target audience
As more information is provided about why a purchase is being made, you can begin to get to know your customers. This too is important in making the perfect pitch since many customers will purchase services or products based on a personal connection. While it may not be necessary to know the fine details of your customer's business, you should know them by name and treat them as though they are the most important customer in the world. Not only will this help to develop a pleasant and solid working relationship with the customer, but it could also potentially lead to additional business through word-of-mouth referrals.
Back up your words with print
Of course when making the pitch to the customer about why your services are better than your competitors it is important to use printed materials to back up what you are saying and even provide additional information. Most people don't pay companies and businesses for non-tangible services right away unless they are something they are going to use only one time. Instead they want time to think it over, and printed materials can be a great resource to use in these situations. Poster printing, flyers, brochures and more are excellent ways to keep your name and information in front of your customers even when they are in the comfort of their own home.
The perfect pitch is obtainable, and it something you must achieve if you offer services rather than products. Following the suggestions discussed here, you can ensure that your potential customers convert into actual clients that make your business profitable and allow it to grow.
1 Apr 2009
Whats a PEST Analysis?
A PEST analysis is used to identify the external forces affecting an organization. This is a simple analysis of an organization’s Political, Economical, Social and Technological environment. A PEST analysis incorporating legal and environmental factors is called a PESTLE analysis.
Political
The first element of a PEST analysis is a study of political factors. Political factors influence organizations in many ways. Political factors can create advantages and opportunities for organizations. Conversely they can place obligations and duties on organizations. Political factors include the following types of instrument:
- Legislation such as the minimum wage or anti discrimination laws.
- Voluntary codes and practices
- Market regulations
- Trade agreements, tariffs or restrictions
- Tax levies and tax breaks
- Type of government regime eg communist, democratic, dictatorship
Non conformance with legislative obligations can lead to sanctions such as fines, adverse publicity and imprisonment. Ineffective voluntary codes and practices will often lead to governments introducing legislation to regulate the activities covered by the codes and practices.
Economical
The second element of a PEST analysis involves a study of economic factors.
All businesses are affected by national and global economic factors. National and global interest rate and fiscal policy will be set around economic conditions. The climate of the economy dictates how consumers, suppliers and other organizational stakeholders such as suppliers and creditors behave within society.
An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. Conversely a “booming” or growing economy will have low unemployment, high spending power and high stakeholder confidence.
A successful organization will respond to economic conditions and stakeholder behavior. Furthermore organizations will need to review the impact economic conditions are having on their competitors and respond accordingly.
In this global business world organizations are affected by economies throughout the world and not just the countries in which they are based or operate from. For example: a global credit crunch originating in the USA contributed towards the credit crunch in the UK in 2007/08.
Cheaper labor in developing countries affects the competitiveness of products from developed countries. An increase in interest rates in the USA will affect the share price of UK stocks or adverse weather conditions in India may affect the price of tea bought in an English cafe.
A truly global player has to be aware of economic conditions across all borders and needs to ensure that it employs strategies that protect and promote its business through economic conditions throughout the world.
Social
The third aspect of PEST focuses its attention on forces within society such as family, friends, colleagues, neighbors and the media. Social forces affect our attitudes, interest s and opinions. These forces shape who we are as people, the way we behave and ultimately what we purchase. For example within the UK peoples attitudes are changing towards their diet and health.
As a result the UK is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of organic food. Products such as Wii Fit attempt to deal with society’s concern, about children’s lack of exercise.
Population changes also have a direct impact on organizations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers fall.
Conversely an increase in the global population and world food shortage predictions are currently leading to calls for greater investment in food production. Due to food shortages African countries such as Uganda are now reconsidering their rejection of genetically modified foods.
In summary organizations must be able to offer products and services that aim to complement and benefit people’s lifestyle and behavior. If organizations do not respond to changes in society they will lose market share and demand for their product or service.
Technological
Unsurprisingly the fourth element of PEST is technology, as you are probably aware technological advances have greatly changed the manner in which businesses operate.
Organizations use technology in many ways, they have;
1. Technology infrastructure such as the internet and other information exchange systems including telephone
2. Technology systems incorporating a multitude of software which help them manage their business.
3. Technology hardware such as mobile phones, Blackberrys, laptops, desktops, Bluetooth devices, photocopiers and fax machines which transmit and record information.
Technology has created a society which expects instant results. This technological revolution has increased the rate at which information is exchanged between stakeholders. A faster exchange of information can benefit businesses as they are able to react quickly to changes within their operating environment.
However an ability to react quickly also creates extra pressure as businesses are expected to deliver on their promises within ever decreasing timescales..
For example the Internet is having a profound impact on the marketing mix strategy of organizations.
Consumers can now shop 24 hours a day from their homes, work, Internet cafe and via 3G phones and 3G cards. Some employees have instant access to e-mails through Blackberry but this can be a double edged sword, as studies have shown that this access can cause work to encroach on their personal time outside work.
The pace of technological change is so fast that the average life of a computer chip is approximately 6 months. Technology is utilized by all age groups, children are exposed to technology from birth and a new generation of technology savvy pensioners known as “silver surfers” have emerged. Technology will continue to evolve and impact on consumer habits and expectations, organizations that ignore this fact face extinction.
Political
The first element of a PEST analysis is a study of political factors. Political factors influence organizations in many ways. Political factors can create advantages and opportunities for organizations. Conversely they can place obligations and duties on organizations. Political factors include the following types of instrument:
- Legislation such as the minimum wage or anti discrimination laws.
- Voluntary codes and practices
- Market regulations
- Trade agreements, tariffs or restrictions
- Tax levies and tax breaks
- Type of government regime eg communist, democratic, dictatorship
Non conformance with legislative obligations can lead to sanctions such as fines, adverse publicity and imprisonment. Ineffective voluntary codes and practices will often lead to governments introducing legislation to regulate the activities covered by the codes and practices.
Economical
The second element of a PEST analysis involves a study of economic factors.
All businesses are affected by national and global economic factors. National and global interest rate and fiscal policy will be set around economic conditions. The climate of the economy dictates how consumers, suppliers and other organizational stakeholders such as suppliers and creditors behave within society.
An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. Conversely a “booming” or growing economy will have low unemployment, high spending power and high stakeholder confidence.
A successful organization will respond to economic conditions and stakeholder behavior. Furthermore organizations will need to review the impact economic conditions are having on their competitors and respond accordingly.
In this global business world organizations are affected by economies throughout the world and not just the countries in which they are based or operate from. For example: a global credit crunch originating in the USA contributed towards the credit crunch in the UK in 2007/08.
Cheaper labor in developing countries affects the competitiveness of products from developed countries. An increase in interest rates in the USA will affect the share price of UK stocks or adverse weather conditions in India may affect the price of tea bought in an English cafe.
A truly global player has to be aware of economic conditions across all borders and needs to ensure that it employs strategies that protect and promote its business through economic conditions throughout the world.
Social
The third aspect of PEST focuses its attention on forces within society such as family, friends, colleagues, neighbors and the media. Social forces affect our attitudes, interest s and opinions. These forces shape who we are as people, the way we behave and ultimately what we purchase. For example within the UK peoples attitudes are changing towards their diet and health.
As a result the UK is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of organic food. Products such as Wii Fit attempt to deal with society’s concern, about children’s lack of exercise.
Population changes also have a direct impact on organizations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers fall.
Conversely an increase in the global population and world food shortage predictions are currently leading to calls for greater investment in food production. Due to food shortages African countries such as Uganda are now reconsidering their rejection of genetically modified foods.
In summary organizations must be able to offer products and services that aim to complement and benefit people’s lifestyle and behavior. If organizations do not respond to changes in society they will lose market share and demand for their product or service.
Technological
Unsurprisingly the fourth element of PEST is technology, as you are probably aware technological advances have greatly changed the manner in which businesses operate.
Organizations use technology in many ways, they have;
1. Technology infrastructure such as the internet and other information exchange systems including telephone
2. Technology systems incorporating a multitude of software which help them manage their business.
3. Technology hardware such as mobile phones, Blackberrys, laptops, desktops, Bluetooth devices, photocopiers and fax machines which transmit and record information.
Technology has created a society which expects instant results. This technological revolution has increased the rate at which information is exchanged between stakeholders. A faster exchange of information can benefit businesses as they are able to react quickly to changes within their operating environment.
However an ability to react quickly also creates extra pressure as businesses are expected to deliver on their promises within ever decreasing timescales..
For example the Internet is having a profound impact on the marketing mix strategy of organizations.
Consumers can now shop 24 hours a day from their homes, work, Internet cafe and via 3G phones and 3G cards. Some employees have instant access to e-mails through Blackberry but this can be a double edged sword, as studies have shown that this access can cause work to encroach on their personal time outside work.
The pace of technological change is so fast that the average life of a computer chip is approximately 6 months. Technology is utilized by all age groups, children are exposed to technology from birth and a new generation of technology savvy pensioners known as “silver surfers” have emerged. Technology will continue to evolve and impact on consumer habits and expectations, organizations that ignore this fact face extinction.
1 Mar 2009
Money Talks, But Its not Loud Enough!
A theoretical study on the effectiveness of financial reward in motivating employee.
Many business managers today are not aware of the effects that motivation have a big role on their business, and it is therefore important they learn and understand the factors that determine positive motivation in the workplace. In his book, (Hunt, 1992), explain inspiring individuals to perform better (motivating) is probably the most important of the managers human skills. It is also possibly be the one providing the greatest return to the manager.
Motivating individuals means creating an environment in which they can satisfy their goals by adding energy and effort. Understanding motivation means understanding three links, they are; goal profile, energy and reward. (Hunt, 1992)
Ideally, managers would recruit individuals whose goals were the same as those of the organization. Managers would select those individuals with more energy to pursue these goals persistently, over a long period of time. Finally, they would have to design a reward system which allows individuals to achieve their goals while at the same time contributing to the goals of the organization.
Basically, there are two reward system used to motivate employee. Rewards can be given financially or non – financially. Financial rewards are a method that is most common when businesses rely on the quantity of the output of employees. For Instant, employees involved in production, could be issued a piece rate system where they are paid for each individual product they produce. In this case, they would be motivated to produce as much as possible in order to achieve a high pay. Managers also can motivate employee financially through paying schemes such as seniority based rewards, performance based, job status and skilled based rewards. (Mcshane and Von Glinow, 2003)
Whiles non financial rewards focuses on motivating employee without the monetary value as an objective. Managers can give employees more responsibility so that they feel their contribution is more valuable to the business and that their role is of higher importance. Examples are job promotions, enlargement, enrichment and rotations. (Mcshane and Von Glinow, 2003)
It is very essential for managers to choose the best reward system approaches to motivate their employees which also depends on the factors that the managers meets, such as company budget and business type. Arguments and discussion has been going on for long in deciding the most effective method to motivate employees.
According to Peter Drucker, ‘There is not one shred of evidence for the alleged turning away from material rewards. Antimaterialism is a myth, no matter how much it is extolled. In fact, they are taken so much for granted that their denial may act as a de-motivator. Economic incentives are becoming rights rather than rewards.' (Drucker, 1974)
In hence, Peter explains there is no doubt that we live in a money-motivated world. Any amount of human relations cannot compensate for a lack of monetary reward. If the reward is right, good human relations will give that extra zest to a team, motivating them to give of their best efforts. ‘Insufficient monetary reward cannot be compensated by good human relations’ (Drucker, 1974)
Ducker’s point of view is based on the theory of scientific management raised by Frederick Winslow Taylor who put forward the idea that workers are motivated mainly by pay. One of Taylors basic assumptions on human behaviour at work is ‘Man is a rational economic animal concerned with maximising his economic gain’ This means that the main form of motivation is high wages, linked to output produced by the workers.
However, other theories have explained a very different prospective compare to what Taylor has conclude in his research. Thus, explains the possibility of money becoming a motivator but not as primary method to motivate the employee on their work performance.
Abraham Maslow along with Frederick Herzberg introduced the Neo-Human Relations School in the 1950’s, which focused on the psychological needs of employees. Maslow put forward a theory that there are five levels of human needs which employees need to have fulfilled at work. All of the needs are structured into a hierarchy and only once a lower level of need has been fully met, would a worker be motivated by the opportunity of having the next need up in the hierarchy satisfied. (tutor2u.net, 2008)
In this case, financial rewards is not the best motivator as it only full fills lower level needs as showed in the diagram. An example would be the need for self – actualisation which cannot be satisfied by financial rewards alone. The need for self – actualisation of an employee can be motivated by other factors like achievements recognitions and awards. Thus, make financial reward have to be considered twice in motivating employees. Frederick Herzberg in the Motivator-Hygiene Theory classifies money or financial rewards as a hygiene factor. ‘Financial rewards do not contribute significantly to job satisfaction; yet the absence of it will result in job dissatisfaction’.
In addition, Herzberg studied what people want from their jobs and classified them into two categories which are satisfier and motivators. Satisfiers are factors that people require from a job to justify minimum effort. These factors include working conditions, money and benefits. After employees are satisfied, however, just giving them more of the same factors don’t motivate them to work harder. Motivators are factors that stimulate people to put out more energy, effort, and enthusiasm in their job. He then concluded that at some stages, financial rewards only meet as a satisfier not as a motivator. (Pell, 1999)
Douglas McGregor in his Theory X makes assumption that the employees in lower level of organizations are motivated to work by financial rewards. He also make another assumption in this theory that people dislikes works and not ambitious, thus financial rewards will be the best motivating factors for this group of employees. For this group of employees, financial reward is a very effective motivating factor that motivates them to perform better in their job.
However, McGregor also comes up with Theory Y which makes assumption that employees in higher level of organizations are not solely motivated by financial rewards. He makes assumption that these groups of people are ambitious and are willing to accept more responsibility in their job. In this case, financial rewards will be insufficient to motivate the employees to perform better and will require proper job design and career planning to motivates them. (Mcshane and Von Glinow, 2003)
In practice, we have to admit that there is business that went to the peak by motivating employees through financial rewards. This is done in companies which their goals focus on the quantity of output made. A sales or marketing company in some ways would be effective to use this method to gain as much profits as possible, encouraging staffs to maximise the sales for a greater earnings.
In some cases financial rewards becomes effective. But in a more wider prospective for both the managers and employees, financial rewards isn’t the best effective ways to motivate the employees to extend their performance since there are high risk of possibility that financial rewards can fail to motivate as desired.
Williams Monahan, CEO of Oakdale, argued that ‘high performers don’t go for the money’. There are also quite a number of top managers who comment that financial reward alone is insufficient in motivating good employees. Thus, companies like Xerox do motivates their employees mainly by designing interesting and challenging jobs. (Mcshane and Von Glinow 2003)
In conclusion, even though in reality we face that financial rewards becomes a motivator, But researches and theories developed by experts as explained above shows that financial rewards doesn’t play a big important role to keep on motivating employees in job performance as they also need to have a psychological motivations like self actualisation and recognitions. Financial rewards aren’t the most effective way to motivate employees for a long period of time. Therefore, it is believed that money talks, but it does not talk loud enough.
Bukit Jalil, February 13 2009
Many business managers today are not aware of the effects that motivation have a big role on their business, and it is therefore important they learn and understand the factors that determine positive motivation in the workplace. In his book, (Hunt, 1992), explain inspiring individuals to perform better (motivating) is probably the most important of the managers human skills. It is also possibly be the one providing the greatest return to the manager.
Motivating individuals means creating an environment in which they can satisfy their goals by adding energy and effort. Understanding motivation means understanding three links, they are; goal profile, energy and reward. (Hunt, 1992)
Ideally, managers would recruit individuals whose goals were the same as those of the organization. Managers would select those individuals with more energy to pursue these goals persistently, over a long period of time. Finally, they would have to design a reward system which allows individuals to achieve their goals while at the same time contributing to the goals of the organization.
Basically, there are two reward system used to motivate employee. Rewards can be given financially or non – financially. Financial rewards are a method that is most common when businesses rely on the quantity of the output of employees. For Instant, employees involved in production, could be issued a piece rate system where they are paid for each individual product they produce. In this case, they would be motivated to produce as much as possible in order to achieve a high pay. Managers also can motivate employee financially through paying schemes such as seniority based rewards, performance based, job status and skilled based rewards. (Mcshane and Von Glinow, 2003)
Whiles non financial rewards focuses on motivating employee without the monetary value as an objective. Managers can give employees more responsibility so that they feel their contribution is more valuable to the business and that their role is of higher importance. Examples are job promotions, enlargement, enrichment and rotations. (Mcshane and Von Glinow, 2003)
It is very essential for managers to choose the best reward system approaches to motivate their employees which also depends on the factors that the managers meets, such as company budget and business type. Arguments and discussion has been going on for long in deciding the most effective method to motivate employees.
According to Peter Drucker, ‘There is not one shred of evidence for the alleged turning away from material rewards. Antimaterialism is a myth, no matter how much it is extolled. In fact, they are taken so much for granted that their denial may act as a de-motivator. Economic incentives are becoming rights rather than rewards.' (Drucker, 1974)
In hence, Peter explains there is no doubt that we live in a money-motivated world. Any amount of human relations cannot compensate for a lack of monetary reward. If the reward is right, good human relations will give that extra zest to a team, motivating them to give of their best efforts. ‘Insufficient monetary reward cannot be compensated by good human relations’ (Drucker, 1974)
Ducker’s point of view is based on the theory of scientific management raised by Frederick Winslow Taylor who put forward the idea that workers are motivated mainly by pay. One of Taylors basic assumptions on human behaviour at work is ‘Man is a rational economic animal concerned with maximising his economic gain’ This means that the main form of motivation is high wages, linked to output produced by the workers.
However, other theories have explained a very different prospective compare to what Taylor has conclude in his research. Thus, explains the possibility of money becoming a motivator but not as primary method to motivate the employee on their work performance.
Abraham Maslow along with Frederick Herzberg introduced the Neo-Human Relations School in the 1950’s, which focused on the psychological needs of employees. Maslow put forward a theory that there are five levels of human needs which employees need to have fulfilled at work. All of the needs are structured into a hierarchy and only once a lower level of need has been fully met, would a worker be motivated by the opportunity of having the next need up in the hierarchy satisfied. (tutor2u.net, 2008)
In this case, financial rewards is not the best motivator as it only full fills lower level needs as showed in the diagram. An example would be the need for self – actualisation which cannot be satisfied by financial rewards alone. The need for self – actualisation of an employee can be motivated by other factors like achievements recognitions and awards. Thus, make financial reward have to be considered twice in motivating employees. Frederick Herzberg in the Motivator-Hygiene Theory classifies money or financial rewards as a hygiene factor. ‘Financial rewards do not contribute significantly to job satisfaction; yet the absence of it will result in job dissatisfaction’.
In addition, Herzberg studied what people want from their jobs and classified them into two categories which are satisfier and motivators. Satisfiers are factors that people require from a job to justify minimum effort. These factors include working conditions, money and benefits. After employees are satisfied, however, just giving them more of the same factors don’t motivate them to work harder. Motivators are factors that stimulate people to put out more energy, effort, and enthusiasm in their job. He then concluded that at some stages, financial rewards only meet as a satisfier not as a motivator. (Pell, 1999)
Douglas McGregor in his Theory X makes assumption that the employees in lower level of organizations are motivated to work by financial rewards. He also make another assumption in this theory that people dislikes works and not ambitious, thus financial rewards will be the best motivating factors for this group of employees. For this group of employees, financial reward is a very effective motivating factor that motivates them to perform better in their job.
However, McGregor also comes up with Theory Y which makes assumption that employees in higher level of organizations are not solely motivated by financial rewards. He makes assumption that these groups of people are ambitious and are willing to accept more responsibility in their job. In this case, financial rewards will be insufficient to motivate the employees to perform better and will require proper job design and career planning to motivates them. (Mcshane and Von Glinow, 2003)
In practice, we have to admit that there is business that went to the peak by motivating employees through financial rewards. This is done in companies which their goals focus on the quantity of output made. A sales or marketing company in some ways would be effective to use this method to gain as much profits as possible, encouraging staffs to maximise the sales for a greater earnings.
In some cases financial rewards becomes effective. But in a more wider prospective for both the managers and employees, financial rewards isn’t the best effective ways to motivate the employees to extend their performance since there are high risk of possibility that financial rewards can fail to motivate as desired.
Williams Monahan, CEO of Oakdale, argued that ‘high performers don’t go for the money’. There are also quite a number of top managers who comment that financial reward alone is insufficient in motivating good employees. Thus, companies like Xerox do motivates their employees mainly by designing interesting and challenging jobs. (Mcshane and Von Glinow 2003)
In conclusion, even though in reality we face that financial rewards becomes a motivator, But researches and theories developed by experts as explained above shows that financial rewards doesn’t play a big important role to keep on motivating employees in job performance as they also need to have a psychological motivations like self actualisation and recognitions. Financial rewards aren’t the most effective way to motivate employees for a long period of time. Therefore, it is believed that money talks, but it does not talk loud enough.
Bukit Jalil, February 13 2009
Capacity to a Contract
One of the elements constitute a valid contract is the parties entering to the contract are those who have the competentcy of which is based on section 10 (1) of the Contract Act 1950 which stated “ All agreements are contracted if they are made by the free consent of parties competent to contact, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void” Section 10 (1) Contract Act 1950.
A competent person to the contract is explained further to have the capacity of being an adult, having a sound mind and not forbidden to enter any contract by law.
This principle is based to the regulation which state that “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject”. Section 11 Contract Act 1950.
In Malaysia, the age of majority is recognized as above eighteen years of age as stated in the Age Majority Act 1971, “The minority of all males and females at the age of eighteen years and every such male and female attaining that age shall be of the age of majority.”
As an effect of section 10 and 11 of contract Act 1950, the court held in the case of Mohori Bibee V Dharmodas Ghose (1903), Tan Hee Juan V Teh Boon Kiat (1934) and Government of Malaysia V Gurcharan Singh (1971) that all such agreements are void. Therefore, all contracts entered by a minor is generally void and a minor cannot sue or be sued such void contracts
However, there are some exceptions towards a minor binding a valid contract. Under section 69 of Contract Act 1950, it is said “If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.” Under necessaries a minor can enter valid contract if only it is the basic need of the minor and suitable of his station in life or lifestyle.
Contract of Scholarship between a minor and the government or non governmental organizations is also valid under the section 4 (a) Contracts (Amendment) Act 1976 “the scholar entering into such agreement is not of the age of majority”.
Similarly, a minor may enter into a contract of marriage or divorcement as at section 4 (a) Age Majority Act 1971, “Nothing in this Act shall affect the capacity of any person to act in the following matters, namely, marriage, divorce, dower and adoption”.
Lastly, a minor may enter into a contract of insurance, pursuant to the Insurance Act 1966 (Revised 1972).
KL, November 11 2008
A competent person to the contract is explained further to have the capacity of being an adult, having a sound mind and not forbidden to enter any contract by law.
This principle is based to the regulation which state that “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject”. Section 11 Contract Act 1950.
In Malaysia, the age of majority is recognized as above eighteen years of age as stated in the Age Majority Act 1971, “The minority of all males and females at the age of eighteen years and every such male and female attaining that age shall be of the age of majority.”
As an effect of section 10 and 11 of contract Act 1950, the court held in the case of Mohori Bibee V Dharmodas Ghose (1903), Tan Hee Juan V Teh Boon Kiat (1934) and Government of Malaysia V Gurcharan Singh (1971) that all such agreements are void. Therefore, all contracts entered by a minor is generally void and a minor cannot sue or be sued such void contracts
However, there are some exceptions towards a minor binding a valid contract. Under section 69 of Contract Act 1950, it is said “If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.” Under necessaries a minor can enter valid contract if only it is the basic need of the minor and suitable of his station in life or lifestyle.
Contract of Scholarship between a minor and the government or non governmental organizations is also valid under the section 4 (a) Contracts (Amendment) Act 1976 “the scholar entering into such agreement is not of the age of majority”.
Similarly, a minor may enter into a contract of marriage or divorcement as at section 4 (a) Age Majority Act 1971, “Nothing in this Act shall affect the capacity of any person to act in the following matters, namely, marriage, divorce, dower and adoption”.
Lastly, a minor may enter into a contract of insurance, pursuant to the Insurance Act 1966 (Revised 1972).
KL, November 11 2008
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